The cryptocurrency market is rapidly changing and developing. Back in 2010, just running a special program on a PC was enough for mining. We tell you what factors need to be taken into account in order for Bitcoin mining to be profitable in 2020.
Consequences of Bitcoin Halving in 2020
In 2020, there was a Bitcoin halving that had a direct impact on the profitability of Bitcoin mining.
Halving is a process embedded in the Bitcoin code, when every 210 thousand blocks the reward for the added block is reduced by 2 and the number of coins issued is reduced.
Unlike Fiat Money, the number of Bitcoins which could be mined is limited — 21 million coins. Today, 18.5 million or 88% of them have already been extracted. Halving occurs every four years in order to control the number of Bitcoins issued to prevent excessive inflation.
If the rate of appearance of new Bitcoins decreases, and the demand remains the same, the Bitcoin price should be increased. At least, this trend was observed earlier:
- The first halving was in 2012. The price for a new block has been reduced from 50 BTC to 25 BTC. During the year, the Bitcoin rate increased by 120 times.
- The second halving was in 2016. The price for a new block decreased from 25 BTC to 12.5 BTC. During the year, the Bitcoin rate increased by 130 times.
- The third halving was in 2020. The price for a new block decreased from 12.5 BTC to 6.25 BTC. Experts’ opinion on the possible impact on the exchange rate were divided.
The consequences of halving for mining are mixed. It becomes unprofitable for miners with outdated equipment to mine blocks for 6.25 BTC. On the other hand, you can expect long-term profitability from the increase in the Bitcoin exchange rate.
Profitability from mining is difficult to predict, as it depends on the following number of factors. Among them:
- Features of Bitcoin: rate, sale price per block, the power of the blockchain, the difficulty of the extraction
- Equipment parameters: price, power, and energy efficiency
- Farm maintenance: electricity cost and other expenses
- Choosing the right mining pool
The features of Bitcoin in 2020 were most affected by halving, which we have just described. Let’s take a closer look at the remaining three factors.
In addition to the situation on the cryptocurrency market, the profitability of mining is determined by the equipment.
The hype around mining has passed, so it is cheaper to build a farm in 2020. Two years earlier, equipment was in short supply and was sold at inflated prices. The actual problem is now not so much related to the cost of equipment, but rather to the choice of the appropriate equipment.
- Antminer S9. A commonly used but an old hardware is now running at a loss. In order for devices with similar characteristics to make a profit, the Bitcoin price should increase to $15,000.
- Antminer S17. The profitability of this device for mining is about $100 per month, and the ROI period is 15 months. The break-even point under current conditions is about $6,000. If the market situation is favorable, this margin of safety may last until the next halving.
- Whatsminer M30S++. This is the most profitable device after halving. It can bring in about $10 per day with an electricity cost of $0.03 kW while a bitcoin rate of $11,400.
- Antminer S19 Pro. The daily profit will be just under $10. For comparison, in the same conditions, the S9 model will bring about $0.60 per day.
Therefore, after halving the mining is profitable only while using the new-generation equipment. The profitability of devices can vary from the low maintenance cost, electricity cost, and other factors.
The easiest way to determine the impact on the profitability of mining is the electricity cost. It’s simple — the cheaper the electricity, the higher the profit.
Let’s take Russia for example. The electricity cost in Russia varies depending on the region: from $0.0149 per kWh in Irkutsk to $0.0721 per kWh in Moscow. On average, profitable mining is possible at a rate below $0.0607 per kWh.
The energy efficiency of mining devices is determined by the number of calculations per joule consumed. Currently, the most effective are:
* M30 Whatsminer — 38 J/T
* Antminer S17-40 — J/T
* Innosilicon T3+ — 42 J/T
For comparison, the already outdated Antminer S9 device has 98 J/T. Only access to a free power outlet can compensate for the use of such inefficient equipment. Modern models provide profitability at higher rates.
Although electricity is the main item of expenditure, there are a lot of other items to consider. Large farms may require additional setup, rental, security, staff, and cooling costs.
How to Choose the Mining Pool
Almost all Bitcoin mining is carried out by mining pools. Pools combine the computing power of miners, and then divide profits.
These pools are so large that the chances that someone will be able to beat them to create a block on their own are almost zero. More than a quarter of the total capacity of the bitcoin network is accounted for by the two largest pools:
- Poolin. The official website www.poolin.com partially supports 7 different languages. In addition to BTC, you can mine 8 other cryptocurrencies. The commission from each extracted block is 5%.
- F2Pool. On www.f2pool.com you can mine not only BTC, but also 37 other coins. The Commission is paid when withdrawing funds, for bitcoin it is 2.5%. There are smaller pools, such as BTC.com, AntPool and Huobi.pool.
Small pools may have better conditions, but you should carefully evaluate their reliability. For example, not all developers provide a protection mechanism against DDoS attacks.
We looked at how halving changed the situation in the bitcoin market. Overall, reducing the block reward by half didn’t make mining unprofitable. Factors such as the correct choice of equipment, the electricity cost, and the complexity of mining in the pool still have a decisive weight.